Appreciated Kyat value puts pressure on developers

The appreciation of the dollar-to-kyat exchange rate has put pressure on Myanmar's property developers as prices for building materials increase also.

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The appreciation of the dollar-to-kyat exchange rate has put pressure on Myanmar's property developers as prices for building materials increase also.

Property developers and contractors in Myanmar are under pressure with the rising costs of building materials due to the appreciation of the dollar.

Colliers International Myanmar state that as the dollar value continues to appreciate (at a high of K1435 according to the Central Bank of Myanmar against USD1, as of 6 August 2018) the cost of most building materials, which are imported from overseas, have become increasingly more expensive.

The cost to transport building materials has also increased as petrol is imported into Myanmar also.

General Secretary of the Myanmar Construction Entrepreneurs Association (MCEA), U Kyaw Kyaw Soe cautions that with the rising of basic building materials due to the import expenses construction costs around the nation will see significant increases.

Demand in the Myanmar property market is still slow, which has further exacerbated the cost pressure effects on local developers. And due to the weak demand, apartment prices have not risen to counterbalance the expenses incurred.

For many developers, this spike will be sure to impact on apartments that pre-sold or were reserved by buyers before the exchange spike.

Prior to the enactment of the Condominium Laws, it was common practice for buyers and sellers to arrange upfront deposit payments before paying the remaining once the property is completed.

In consideration of these types of arrangments, developers will likely struggle to fund ongoing construction of projects as the costs continue to rise.

On the other hand, the current change rate gives foreigners the perfect opportunity to enter the property market. Despite this investment opportunity, the lack of clear government laws and regulations surrounding the property market does offer foreigners pause before investing.

Colliers adds that the frequent currency fluctuations may impact on foreign investors' confidence within the economy.